Which of the Following Is a True Statement About Cost

question 81

Multiple Choice

Which of the following is a true statement about cost behaviors in incremental analysis?
1. Fixed costs will not change between alternatives.
2. Fixed costs may change between alternatives.
3. Variable costs will always change between alternatives.

• A) 1
• B) 2
• C) 3
• D) 2 and 3

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Definitions:

Required Return

The minimum annual percentage earned by an investment that will induce individuals or companies to put money into a particular security or project.

Market Capitalization Rate

The expected rate of return on a portfolio consisting of all publicly traded stocks, used as a measure to value a company's stocks based on the market’s expectations of its future earnings.

Earnings Retention Ratio

A financial metric indicating the percentage of a company's net earnings that is not paid out as dividends, but instead retained for reinvestment.

Excluding Growth Opportunities

The omission or overlooking of potential future projects or investments that could lead to an increase in company value.